Square, the first company to meaningfully integrate credit card point-of-sales services into mobile devices, has witnessed unquestionable success over the past five years. With a customer base in excess of 1 million businesses, Square processes about $30 billion in annual merchant sales; this translates to $900 million in revenue for the company. Furthermore, after raising more than $600 million in VC funding, resulting in a $6 billion valuation, Square looked poised for an upcoming IPO. However, after Apple’s (AAPL) Apple Pay release, it appears Square’s unrivaled success may experience an abrupt end.

Much like the vision of Square’s founders, Apple Pay aims to make wallets obsolete. Unfortunately for Square, Apple has an undeniable advantage over the small San Francisco startup. With a market capitalization of $633 billion and cash reserves of over $150 billion, Apple makes Square’s $6 billion valuation look negligible. For this reason alone, Apple actually has the ability to personally wipe out any small company that stands in its way, like Square. However, more often than not, Apple purchases these companies. In fact, Apple has already tried to buy Square. Reportedly, Apple attempted to acquire Square for $3 billion just days before it announced Apply Pay. Apple wanted to use Square’s established payment platform to host the Apple Pay system. Square rejected the deal, which it may soon regret. Apple Pay's retail reach will easily eclipse Square's 1 million business count. According to Citi Analyst Jim Suva, “Apple Pay has already signed up major issuers that control 83% of the credit card payment transactions today in the U.S. Also, 22,000 retailers have signed up.” Already partnered with the largest banks in the country, such as Wells Fargo (WFC), Citi (C), and Bank of America (BAC), and businesses like Nike (NKE), Whole Foods (WFM), and McDonald’s (MCD), Apple's payment system is poised to be immensely successful.

Square's survival hinges on how quickly Apple users adopt Apple Pay for their shopping needs. Unfortunately for Square, over 1 million credit cards were activated within the first 3 days of Apple Pay's release. If Square wants to survive, management must make immediate changes to their business model. Square already tried, and failed, to develop its own mobile payment system (it was originally named Wallet); directly challenging Apple Pay is not a realistic option for Square. That being said, Square’s best option may be to work alongside Apple. Square founder, and Twitter (TWTR) Co-Founder, Jack Dorsey already stated that sellers using Square will be able to accept Apple Pay for retail payments. For this reason, Apple Pay's growth may actually help Square. As is the case with most new technology, there are also individuals who will not immediately use Apple Pay, and will stick with their credit cards. Because of this, Square can now monetize through both credit cards and Apple Pay. 

Additionally, Square continues to develop a number of apps to help maintain the company’s relevancy. Square Cash is an app that functions similarly to Venmo, allowing users to instantly send money to one another. Square also created a new food-ordering app called Order, in which users must pick up their orders from nearby restaurants; but with its recent acquisition of Caviar, a food delivery startup, Order could soon become a full-fledged food delivery service. 

Clearly, Square will not go down without a fight. However, if Square hopes to build upon its remarkable track record, and prepare for an IPO, a number of changes must occur. First, businesses using Square must continue to do so, while simultaneously accepting Apple Pay via the Square platform. Second, Square must increase its customer base to maintain its market share. Third, Square needs to continue developing new, innovative apps, while also ensuring its existing apps grow. If Square can accomplish the aforementioned, it may thrive alongside Apple Pay rather than collapse under it.